A company has a capital structure that consists of $20 million of debt and $20 million of common equity, based upon current market values. The company’s yield to maturity on its bonds is 8%, and the current stock price is $35, the last dividend paid was $1.10 and the dividends are expected to grow at constant rate of 5% for long time. If the tax rate is 40%, what is this company's WACC assuming that there won’t be any new equity issuance?

 

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC for a company we need to consider the cost o... View the full answer